Covid 19 as a crisis of realization

Think - under the banalities hawked around by politicians and the press - why should a highly contagious virus cause such economic disruption?

If we were living in a what we might call a primitive society and economy, if people had to stay at home for the duration, it would not make that much difference; so long as a sufficient number of workers were able to continue to provide the basic necessities of life there would be no economic melt-down.

But we don’t live in a primitive society. If we aren’t able to go to work, we won’t have the cash to buy the goods and services provided by all the other people who would need to go to work, or they themselves wouldn’t have the cash to buy what we ourselves produce, and so on and so forth.  We wouldn’t have the money to pay the rent, so the landlord that bought the property to let wouldn’t be able to pay the mortgage, and so on and so forth.

We are all in this merry go round in which we are not so much providing goods and services that we (and others) actually need - more we are going to work to have the money to realize the values of all the other goods and services that all the others are producing

It is only a tiny minority who are producing stuff we cannot do without.  So the crisis is not that we are rapidly running out of all the stuff we cannot do without, it that we are not earning wages and salaries, that are needed so all the other people can be paid their wages and salaries.

The underlying cause of the impending economic crisis is that the system is one enormous Ponzi scheme based on mountains of debt and credit.  The reason we have to earn the money is for instance because we have to pay the rent.  The price of the house  or flat the landlord bought related to the rent that he could expect, which in turn assumed that the tenant would have a job that paid a wage sufficient for him to be able to pay the rent. 

This is what Marx called “fictitious capital”.  The price of the house or flat was like a promissory note for the delivery of rent at some future time - it was fictitious in that that future was not yet real. In fact is was also fictitious in that there were all sorts of eventualities that might make render its value a lot less or even nothing at all; There might be a pandemic; or a war; or a revolution in all which tenants were give title to their home, or the Grenfell Tower inferno might have made the apartment worthless (unsaleable) 

Certainly if it had been foreseen that their was about to be a pandemic, and rents were to be suspended for the duration, the price of the house - its exchange value - would have been greatly reduced. 

In fact the world economy is floating on oceans and oceans and oceans of credit and debt. And this is not some incidental error - it is inscribed within the system itself.

Suppose we have a very simple economic structure.  In this world we have a single product of baked beans.  A worker produces 100 tins of baked beans, for which he is paid the equivalent of 60 tins of baked beans; the remaining 40 tins are the surplus value generated in the business.  The worker uses his wage to buy 60 tins of baked beans, so who bought the other 40 tins. 

There are all sorts of ways in which the value of the outputs can be generated within the economy. If the economy is booming the capitalists can build more baked bean factories and order more machinery, and the workers in these sectors will buy up (realize the value of) some of the surplus outputs.  But this exponential expansion will soon reach its limits - the whole world will be filled with outputs the value of which is only realize by the exponential increased production (in the new plants). Or they can be exported (imperialism); But after a time the importing countries set up there own baked bean factories and the world is finite soon there are no more zones outside the global economy to which to export.  Then governments can order armaments from capitalists and the men making bombs and guns will be able to buy the excess baked bean production.  All these and many more strategies are used to the full (hence endemic wars) but after a time it is found that the only way to realize the full value of the totality of outputs is to use the profits to lend to the workers to enable them to buy what they need today and pay for them (with interest) tomorrow.

And this is precisely what has happened. Every sort of debt - private debt (incurred in buying up surplus output) government debt (paying all the people to run the country)  commercial debt (borrowing so they have the money today in expectation of receipts tomorrow) have in the last few decades shot into the stratosphere. 

And this is why the inability of the workforce to work is so catastrophic.  Unless they go to work and earn money and spend that money to realize the values of goods and services, the bubble will burst - the potential value of outputs across the global economy will remain just that - potential value.

As the global economy expands exponentially, so the problems of realization increase exponentially, the expansion of fictitious capital expands exponentially, debt expands exponentially and the faster the down escalator  runs the faster we all have to dun up the down escalator to remain in the same place.  Any slight hiccup and and the whole bubble will burst, and all that fictitious capital will be seen for what it is - fictitious.

Covid may kill a small proportion of populations but the problem is not the human race is on the path to extinction, it is that the economy is on the path to extinction and covid is the trigger